Wednesday, August 08, 2007

NSTK trade

Readers of this blog have been fairly disappointed by absence of charts with explanations of technical details of the trades. I totally agree, for educational purposes ( one of the reasons why this blog exists on the first place ) it is a must to have. But here is my dilemma - I have been looking at the charts for so many years that most of the times it is intuitive for me and , if explained - will, most likely, severely disappoint pure technicians.
Still, here is one of my latest trades with explanation of why "decision to exit trade been made" ( why it was placed on the first place? cannot recall now - extra prove of "I like it for some reason" of trading decision :)

Opened long position on July 10th at 11.60. Why? Was not really confirmed breakout, but still move to new higher ground with supporting volume - my expectation was that NSTK is going to out perform the general market.

Decision to close trade: firstly - I do not like to gamble - earnings are gamble, I in most of the cases will be able to buy back stock even if it will pop on ER, if I miss - there going to be many other trades. If ER will be bad - I'll lose - still, after so many years on the market hate to loose.

Anyhow, August 8th after market close - earnings. That is "sell argument #1"
August 9th webcast, hmm.. Friday? well, I will survive if stock will double and I did not get it, what will hurt - if I loose about 30% profit I have in 1 month ( slow and steady does it )

I have to confess - I was so focused on my decision "to close the trade on August 8th" that I closed position even without looking at any sell sygnals.
But how it had to be done correctly?

Consolidation from 10:30 to 12:00 was orderly - not to worry.
At 12:20 new daily high was reached and all in a sudden buying interest just evaporated. ( first oval on pressure bars )
NSTK did not fell off trend channel and continued its climb. Why I always watch trend channel? Simple - I hate to sell with the crowd and when stock falls off - crowd sells and I would not be able to get a good price when hundreds of trailing/stop loss orders been fired at once.

As price was going up from 13:15 till 13:40 CMF ( Chaikin Money flow) was declining,
fast stochastic (main) took a dive at 13:30, and finally "pressure bars" ( bid/ask buying) was worsening really fast and finally at 13:50 at new daily high - there was only selling final call in my books if that would be a day trade.

Now I have to read this mambo-jumbo I wrote... but first I need a drink